April 15, 2013

Fantasy Freestyle

Searching for Value in Contract Clauses

by Mike Gianella

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When I was a small child everything I knew about baseball came from either the back of a baseball card or what the local color guys for the Yankees and Mets told me on TV. During this impressionable age, I remember reading about Steve Stone winning the Cy Young Award in 1980 and how he earned a $10,000 bonus for his trouble. As an impressionable lad, I figured that for Stone to have this bonus in his contract he had to be an excellent pitcher. Some superficial research told me that this wasn’t the case at all; Stone was a solid-but-unspectacular pitcher. As I learned from the back of this particular baseball card, the bonus clause was put into the contract, but it was something the Orioles figured he’d never collect.

“It was like an insurance salesman telling you, ‘We’ll give you $50,000 if an elephant falls on you,’ because he knows darn well an elephant isn’t going to fall on you,” Stone said at the time.

“Elephant clauses” are popular with some general managers and teams for precisely the reason Stone cited. Give a player a modest incentive to succeed with an incentive clause, and if he does, the modest cost of the clause is far outweighed by the value the player provides. If the player doesn’t succeed, it costs you nothing beyond the value of the contract.

One of Baseball Prospectus’ readers wanted to know if there was a correlation between games-finished clauses and pitchers becoming closers in-season. Thanks to the excellent work of Baseball Prospectus’ Jeff Euston, I have the ability to go back and look at a healthy amount of contracts with games-finished clauses and whether or not these pitchers wound up closing.

Table 1: Pitchers with Games Finished Clauses and How They Fared

The italicized are the pitchers that hit at least one of their games-finished clauses. The pitchers with an asterisk next to their names were not closers the prior year and assumed the reins the year their incentive clause was in place.

Including duplicates, there are 47 pitchers on this chart. Ten of them reached at least one of their games-finished clauses. Three of those pitchers—Octavio Dotel, Kyle Farnsworth, and Jason Motte—reached those clauses after not closing the previous season, but Farnsworth was the only one who didn’t start the campaign as closer and then wound up inheriting the job.

It seems, then, that the games finished incentive clauses serve two purposes:

1. The clauses can be used to incentivize existing closers and make them more money if they succeed in the job that they already have.
2. The clauses are the so-called “elephant clauses” that Stone referenced. The 2006 version of Octavio Dotel wasn’t closing unless something horrible happened to Mariano Rivera. More than a few of the pitchers on this list were clear backups to a rock solid closer.

So chasing pitchers due to games-finished clauses in the hopes that you might find an in-season closer is tilting at windmills. In case you’re curious, though, here are the relievers that have games finished clauses in 2013 and beyond:

The future games-finished clauses seem to fit the same profiles: either established closers or elephant clauses. Soria’s clause would be interesting should something happen to Joe Nathan, but then this assumes full health sooner rather than later for Soria.

The lessons in buying closers or chasing would-be closers remain the same: Chase skills, not roles. If you must buy into roles, make sure that you pay for the guy with the fat contract; it’s far less likely the team will jettison him after one terrible outing. Games-finished clauses are fun to look at, but don’t get distracted by the elephant in the room.

Mike Gianella is an author of Baseball Prospectus. Follow @MikeGianella
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